Sunday, 20 January 2013

Original article

Is there value in MVNOs?

THE MODEL HAS TAKEN SOME STICK, BUT THE WHOLESALE MODEL DOES NOT DIE EASILY

I have received an email from Pyramid with this title. It is amazing, two year's after publishing "next generation MVNOs" that Pyramid finally ask if there is still value in the last generation MVNO... Well no; there was no value in them anymore in 2004 when I began writing the report, nor was there in 2005 when it was published, and there is less still today. Today's MVNO is a much leaner operation that its forerunners like Virgin. As successful as Virgin was, it was created in the late 90's when spending $20Bn on a 3G network weemed like a good idea. Today's MVNO should have now got down to a T the ideas I put forward in 2005, and the key to a successful MVNO or Mobile Virtual Network in 2007 and 2008 will be:

Handing over "legacy" cost bases to the host MNO or even the handset manufacturer. MNOs handle huge risk every month: every month the UK MNOs and even handset sellers put forward their forecasts for sales. To give an idea, Nokia UK typically sell 500,000 handsets every month in the UK, their best month was 2 million handsets... so even a few hundred thousand handsets up or down on a mobile network operator's book, or even a large manufacturer like Nokia, well is not a huge issue. However, put this discrepancy into every MVNO business plan I have seen, and I have seen most that have passed the UK MNO, consultancy or investment market, and the business model runs into problems. The MVNO opportunity today lies clearly in new markets, lots of niche markets the MNO and even handset manufacturer cannot / do not directly capture or target. If they want these markets, they can either sponsor a music festival or two at the cost of a few million, or they could spend the same or less managing handsets for niche MVNOs with direct sales as a result.

Niche, Niche and Niche; The MNO brand will only stretch so far, niche MVNOs can capture new markets or keep existing users.

MVNA: the MVNE will not punt on small players, MNOs will not punt on anyone but "the next Virgin", however there are millions of subscribers in the UK alone who have very strong ties with major brands, events, social movements, clubs and other would be MVNOs, who 10,000 subscribers here, 30,000 subscribers there, add up to 100,000s of subs put together. They may all be different, but they do have a few things in common: simpler tariffs, smaller handset selection, more focussed customer care. The MVNA is just around the corner.

Cost reduction; gone are the days of warehousing branded phones with custom software; the clever MVNO will "brand" the handset Over the Air (OTA), either with an On Device Portal or an OTA software upgrade

DIY MVNO. US company Sonopia are offering user the ability to set up an MVNO in 10 minutes and receive 5% of the revenue. While this article, reported on The Register suggests that this model may not be popular in Europe, where the handset, then the tariffs, not content, which I agree with, it does propose an interesting trend: That MVNOs should compete on something other than on handset or tariff to e competitive, and that network generated income should be a revenue stream, not the sole source of revenue for the MVNO business model. Having written, contributed to, carried out due diligence on many MVNO business models over the last 8 years, and in light of the failures of EasyMobile, it is clear to me that the post Virgin and Tesco MVNOs will need to leverage their brand, content and or other much more effectively, to counter the fact that economies of scale in this market are a thing of the past. Realistically, going forward MVNO need to base their business model on breaking even on 10,000s of customers, not the millions or 100,000s that the many jumping late on the MVNO bandwagon seem to band around. Competing on handset and tariff is the domain of the MNO, not the MVNO. Added to this, it will not be long before people realise how expensive network subsidised phones actually turn out to be and look to source their phone separately, to then focus on a "network" that offers them the content, services, or simply just the bitpipe for voice and text that the individual wants.

Monday, 21 May 2012

VAS MVNO, Facebook MVNO

As many of you will know, I feel quite passionately about VAS and the MVNO. This is not just an obsession, its just a realisation that any good business needs a tie-in, a value-add, a "something" that means it does not sell on price alone, and so when a newer, shinier competitor comes along, in order of preference the customer goes:

I would have to change the way I do all my...(insert VAS here) to work with the new service, medium value - useful advantage

I would have to update all my details, low value - would just be a pain to move, like moving bank account or electricity provider

The problem is, most MVNOs, and even some MNOs are not even on point 3 level of VAS.

So why not? well there is a list of reasons why from a legacy perspective this was the case, however things are changing

The usual ways to leverage data was content, content, content. were an expensive portal, streaming video, etc, etc. These days are gone, and the proof is the above. Indeed the days were never there, the amount of conferences I have chaired, attended and spoken at where "content" was the supposed issue, and all I could say was, customers have content: its emails (blackberry proved this to be the case!) and the web in general, but on the mobile.

Facebook is driving MVNO

The proof is hand is this article: showing that facebook access from mobile has now surpassed computer access. I am honestly not surprised. In fact, in app development focus groups even 3 years back, we saw that a good mobile app, like only apple had at the time (an app that did not look like a mobile web browser, allowed upload of images and push notifications, chat) managed to completely shift usage of Facebook from computer to mobile, while more basic ones and now the very good mobile web experience manage to take a good deal of it.

The reasons for this are multiple,

many people do not have access to unrestricted internet access or facebook at work

most of those who do would rather not be seen using facebook at work

using Facebook on a PC raises probably more privacy issues as computers tend to be shared more and have more browsing history that people may not want plundering so facebook can make more advertising revenue

the key one however is convenience, Facebook, and indeed our digital lives, are now round the clock, constant streams of info, updates, feeds, chats and more: mobile just suits this better, whether its from a web browser or an app

VAS is driving MVNO data

The key is, with it being so simple to get this working, why are so many MVNOs still rendering themselves as a low value, sim-swapping bitpipe when all they need to do is get APN settings set-up, and some simple data tariffs. As we have seen, most users are using less than 100mb per month anyway as per my previous article on this blog, and as per my blog on Apps and App stores showing that even the most basic MVNO type handsets that many MVNOs perceive their user base is using, which means MVNOs can still be very competitive with the average data prices I am seeing while negotiating MVNO agreements (at least the prices I have seen in the last 3-5 years) and/or ones that could be easily and quickly agreed with an MVNO if approached with a plan around social networking, rather than the usual "I need cheaper prices" routine :)